Keywords: Retirement Investing. Investment Strategies 70s and Beyond Financial Planning. Edward Jones. Portfolio Management. Risk Management. Retirement Income. Legacy Planning. Estate Planning. Financial Advisor
As you enter your 70s and beyond, your financial priorities shift towards preserving your accumulated wealth and generating sustainable income to support your retirement lifestyle. While the traditional wisdom of shifting towards low-risk investments holds merit, a more nuanced approach is often necessary to navigate the complexities of this stage of life This guide explores key investment strategies tailored for individuals in their 70s and beyond, helping you safeguard your nest egg and achieve your financial goals
Navigating Investment Strategies in Your 70s:
1. Monitor Spending and Withdrawals:
While the 4% rule can serve as a starting point for determining annual withdrawals, it’s crucial to maintain flexibility in your withdrawal strategy. Unexpected market fluctuations or changes in your lifestyle may necessitate adjustments to ensure the longevity of your portfolio. Regularly reviewing your spending and withdrawal plan, ideally annually, allows for proactive adjustments and increases the likelihood of your portfolio sustaining you throughout retirement.
2. Prioritizing Flexibility:
The chart below vividly illustrates the impact of adjusting annual withdrawals based on market performance. By forgoing annual increases during periods of portfolio decline, the probability of your portfolio lasting 25 or 30 years significantly improves. This highlights the importance of a flexible withdrawal strategy that adapts to market conditions and your evolving needs.
3. Embracing Lower-Risk Investments:
With retirement income needs met through withdrawals, consider allocating a year’s worth of income in cash and three to five years’ worth in CDs and short-term fixed-income investments. This ensures readily available funds for immediate needs and protects against selling assets during market downturns.
4. Maintaining Growth Potential:
While a significant portion of your portfolio should be allocated to lower-risk investments, don’t overlook the importance of growth potential. Depending on your age and life expectancy, you could have 25 or more years of retirement ahead, necessitating investments that outpace inflation. A small allocation to growth investments, such as stocks, can provide diversification and enhance returns without compromising overall risk.
5. Legacy Considerations:
If you have earmarked assets for legacy goals, consider taking on more risk with those investments due to their longer time horizon. This allows for greater growth potential while aligning with your long-term objectives.
6. Required Minimum Distributions (RMDs):
At age 73, you’ll need to start taking RMDs from your tax-deferred retirement accounts. Failure to do so incurs a hefty 25% penalty on the undistributed amount. Your first RMD is typically due by April 1 of the year following your 73rd birthday, with subsequent withdrawals occurring by December 31st annually. The RMD amount is calculated by dividing your account balance by a life expectancy factor provided by the IRS. Consult your Edward Jones financial advisor for assistance with RMD calculations.
7. Utilizing RMDs Strategically:
If your RMDs are required to cover living expenses, consider them a primary source of funds. However, if they exceed your needs, reinvest them into a taxable account for continued growth. Alternatively, use them for charitable contributions through a qualified charitable distribution (QCD), potentially reducing your tax burden. Additionally, consider using RMDs to cover life insurance premiums within an irrevocable life insurance trust, offering estate tax benefits and avoiding gift taxes.
8. Designating a Trusted Contact:
Identify a trusted individual, such as a family member, friend, or neighbor, whom your financial advisor can contact if they suspect you might be experiencing financial exploitation, diminished capacity, or fraud. This designated contact would not have access to your account information or decision-making power but would serve as a point of contact for your advisor.
9. Reviewing Your Estate Plan:
Ensure your estate plan is up-to-date and aligns with your current wishes, especially after significant life changes like marriage, divorce, or the birth of grandchildren. Key elements to review include:
- Will: Outlines how your assets should be distributed upon your passing.
- Incapacity Documents: Designate a financial power of attorney, health care power of attorney, and complete a health care directive.
- Trust (if applicable): Appoint a trustee to manage assets on behalf of beneficiaries.
- Beneficiary Designations: Review beneficiary designations on retirement accounts, life insurance policies, and any Transfer or Payable on Death (TOD/POD) accounts or property.
- Legacy Goals: Assess whether you’re on track to achieve your desired legacy goals.
Partnering with Edward Jones:
Edward Jones financial advisors are equipped to guide you through developing a personalized investment strategy tailored to your unique financial goals and circumstances. Schedule a no-obligation consultation today to discuss your retirement planning needs and explore how Edward Jones can assist you in safeguarding your financial future.
Investing in your 70s and beyond requires a strategic approach that balances risk management, income generation, and legacy planning. By adopting a flexible withdrawal strategy, incorporating lower-risk investments with growth potential, and utilizing RMDs effectively, you can navigate this stage of life with confidence and ensure your financial well-being for years to come. Partnering with a trusted financial advisor like Edward Jones can provide invaluable guidance and support as you navigate the complexities of retirement investing.
What Seniors Should Look for When Investing
The following should be taken into account when figuring out the safest investment strategies:
- Accounts covered by the FDIC: Rest easy knowing that your deposits are safeguarded by the federal government. The insurance amount is currently $250,000 for certain investment options.
- Low-risk, low-return investing: If you’re not a risk-taker, that’s okay. Although safe investment options may have low risk and low returns, they can be useful if you’re trying to find a long-term, risk-free way to make passive income.
- Diversification: Consider the future of your long-term investments for low risk. Rather than depending solely on Social Security or retirement funds, think about diversifying your investment portfolio with a variety of safe investment options such as bonds and high-yield savings accounts in place of Having more options is always preferable when it comes to retirement income.
- Apps and resources for safe investing: Become knowledgeable by downloading these resources and apps or by consulting a financial advisor.
Did You Know: Diversify your investment portfolio. Low-risk options like certificates of deposit and high-yield savings accounts can be excellent substitutes for stocks if you’re not into them.
Six Safe Investments for Seniors
Compared to traditional savings accounts, high-yield accounts offer higher interest rates, which can help you grow your money passively. Because this safer investment option is FDIC-insured, you won’t have to worry about monthly fees or significant financial risks. Furthermore, the interest is compounded daily, which might encourage you to save money and see it grow more quickly than it would in a conventional savings account.
As an illustration, suppose you transferred $25,000 from your savings to an AMEX high-yield savings account at 0% interest. For five years with no monthly deposits, you will earn 40% annual percentage yield (APY) and $504 in interest. Compared to stocks or other high-risk investments like dividend-paying stocks, which depend on the company to pay dividends, this may be a safer investment choice for some people. However, given the rising cost of living and inflation, the interest received on these accounts might not amount to much.
Why invest: You’ll benefit from a safer return on your investment when you select an FDIC-insured institution offering a higher annual percentage yield. Nowadays, most high-yield savings accounts offer a higher average percentage yield (APY) than traditional savings accounts.
Potential hazards: Depending on the bank you select, interest rates may change. Although you can still access this money when needed, taking multiple withdrawals or using it for multiple transactions could result in penalties. Check with your institution for its policies and restrictions. If you take out or move money frequently, you might want to think about going with an alternative, like a certificate of deposit.
Advantages: Almost always, a high-yield savings account will prevent you from losing money.
Hint: Discover more about the many home modifications that Medicare will pay for by reading my guide to Medicare Home Modifications.
One of the safest investment options available to seniors are certificates of deposit (CDs), which allow a set amount of money to be invested for a predetermined period of time and guarantee a return. Banks, brokerage houses, and credit unions all sell these; the bank will pay a higher fixed interest rate on the fixed amount. It’s a savings account with a set interest rate for a predetermined amount of time.
CDs are insured up to $250,000, just like high-yield savings accounts are by the FDIC. When you redeem the CD, you’ll get your original investment back plus interest.
Why Invest: You won’t have to worry about fluctuating interest rates if you put money into a CD. Higher interest rates on your deposit and no monthly fees are available to you.
Potential risks: Some seniors might be vulnerable to fraud from people claiming to be deposit brokers. It’s important to research and review the official online database to check the individual’s affiliation. There’s also usually a penalty if you need to withdraw the funds before the fixed term is over. CDs are not intended for people who want to have access to their funds. Essentially, you can withdraw the money you put in and the interest it earned only after the CD has matured.
Advantages: Compared to traditional savings accounts, certificates of deposit typically carry higher interest rates and pose no risk. The rates are fixed, unlike APYs for other accounts. Also, certificates of deposit (CDs) offer a guaranteed return on investment if you don’t want to take any chances.
FYI: Check out my guide to living wills for more information on how these investment options may affect an inheritance.
Financial Planning In Your 70s
FAQ
What is the best investment mix for a 70 year old?
Is 70 too late to start investing?
How much does the average 70 year old have in savings?
What is the average net worth of a 70 year old?
|
Age by decade
|
Average net worth
|
Median net worth
|
|
50s
|
$1,310,775
|
$292,085
|
|
60s
|
$1,634,724
|
$454,489
|
|
70s
|
$1,588,886
|
$378,018
|
|
80s
|
$1,463,756
|
$345,100
|
What is a good investment for a 70 year old?
The average 70-year-old would most likely benefit from investing in Treasury securities, dividend-paying stocks, and annuities. All of these options offer relatively low risk. What is the safest investment with the highest return?
Should you invest at every age to reach your retirement goals?
Here’s how to invest at every age to reach your retirement goals. Investing for retirement is important at any age, but the same strategy should not be used for every stage of your life. Those who are younger can tolerate more risk, but they often have less income to invest.
Do you still need investments as you age?
You’ll also still need intermediate- and long-term fixed-income investments in your portfolio as well as growth investments, like stocks. As you age, your allocation to these types of investment should continue to decrease.
Should you invest for retirement?
Investing for retirement is important at any age, but the same strategy should not be used for every stage of your life. Those who are younger can tolerate more risk, but they often have less income to invest. Those who near retirement may have more money to invest, but less time to recover from any losses.